BQE Water (BQE:TSXV;BTQNF:OTC) reported its fourth quarter (Q4) and full-year 2023 financial results yesterday, beating expectations on revenue and aligning with EBITDA estimates, as reported by Atrium Research analysts Nicholas Cortellucci and Ben Pirie in an April 26, 2024 research note.
"Q4 marked another excellent quarter for BQE, beating our estimates on revenue and being in line with EBITDA. The beat was driven by the operation services (recurring) segment, which grew 114% YoY," the analysts commented. "We remain highly confident in our investment thesis in BQE, which was laid out in our initiation report last month."
Cortellucci and Pirie maintained their Buy rating on BQE Water and increased their target price to CA$71.00/share from CA$55.00/share, based on 11.0x 2025E EBITDA.
In Q4/23, BQE Water's proportional revenue reached CA$5.4M (+21% YoY), surpassing the analysts' estimate of CA$4.2M. The company's gross margin was 55%, compared to the expected 45% and 41% in Q4/22. Adjusted EBITDA came in at CA$541K (10% margin), close to the analysts' estimate of CA$600K and a significant improvement from the (CA$0.1M) in Q4/22.
For the full year 2023, BQE Water's proportional revenue was CA$22.7M (+20% YoY), exceeding the expected CA$21.5M. Gross margin was 50%, compared to the estimated 48% and 42% in 2022. Adjusted EBITDA reached CA$4.7M (20% margin), in line with the analysts' estimate and up from CA$3.1M (16% margin) in 2022.
"BQE remains well positioned for another record year in 2024; we are expecting 8% revenue growth and 36% EBITDA growth," the analysts noted, highlighting the company's strong performance and growth prospects.
BQE Water's strategic focus on expanding its recurring revenue stream through its operation services segment has been a key driver of its success. The company's technical expertise and innovative water treatment solutions have positioned it as a leader in the industry, with a growing client base across various sectors, including mining, oil and gas, and industrial wastewater treatment.
The company's management team, led by CEO David Kratochvil, has been instrumental in executing its growth strategy and securing new contracts. BQE Water's strong financial position, with a healthy balance sheet and increasing cash flow generation, provides the company with the flexibility to pursue further growth opportunities and strategic partnerships.
With a target price of CA$71.00/share, Atrium Research sees significant upside potential for BQE Water's stock as the company continues to deliver strong financial results and capitalize on the growing demand for sustainable water treatment solutions.
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Disclosures for Atrium Research, BQE Water, April 26, 2024
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